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Competitive Equilibrium in Markets for Votes

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  • Alessandra Casella
  • Aniol Llorente-Saguer
  • Thomas R. Palfrey

Abstract

We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define the concept of Ex Ante Vote-Trading Equilibrium, identify weak sufficient conditions for existence, and construct one such equilibrium. We show that this equilibrium must always result in dictatorship and the market generates welfare losses, relative to simple majority voting, if the committee is large enough. We test the theoretical implications by implementing a competitive vote market in the laboratory using a continuous open-book multi-unit double auction.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000143.

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Date of creation: 03 Sep 2010
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Handle: RePEc:cla:levarc:661465000000000143

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  1. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Carmen Bevia & Martine Quinzii & JosŽ A. Silva, . "Buying Several Indivisible Goods," Department of Economics 97-20, California Davis - Department of Economics.
  3. Hortala-Vallve, Rafael & Llorente-Saguer, Aniol, 2010. "A simple mechanism for resolving conflict," Games and Economic Behavior, Elsevier, vol. 70(2), pages 375-391, November.
  4. Rafael Hortala-Vallve, 2007. "Qualitative Voting," Economics Series Working Papers 320, University of Oxford, Department of Economics.
  5. Edward C Prescott & Robert M Townsend, 2010. "Pareto Optima and Competitive Equilibria With Adverse Selection and Moral Hazard," Levine's Working Paper Archive 2069, David K. Levine.
  6. Casella, Alessandra & Palfrey, Thomas & Riezman, Raymond, 2008. "Minorities and Storable Votes," Quarterly Journal of Political Science, now publishers, vol. 3(2), pages 165-200, July.
  7. Plott, Charles R., . "Industrial Organization Theory and Experimental Economics," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 405, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Dirk Engelmann & Veronika Grimm, 2012. "Mechanisms for Efficient Voting with Private Information about Preferences," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 122(563), pages 1010-1041, 09.
  9. Yang, Zaifu, 2000. "Equilibrium in an exchange economy with multiple indivisible commodities and money," Journal of Mathematical Economics, Elsevier, vol. 33(3), pages 353-365, April.
  10. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
  11. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
  12. Alessandra Casella, 2002. "Storable Votes," NBER Working Papers 9189, National Bureau of Economic Research, Inc.
  13. Forsythe, Robert & Palfrey, Thomas R. & Plott, Charles R., . "Asset Valuation in an Experimental Market," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 299, California Institute of Technology, Division of the Humanities and Social Sciences.
  14. Danilov, Vladimir & Koshevoy, Gleb & Murota, Kazuo, 2001. "Discrete convexity and equilibria in economies with indivisible goods and money," Mathematical Social Sciences, Elsevier, Elsevier, vol. 41(3), pages 251-273, May.
  15. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2007. "Bootstrap-Based Improvements for Inference with Clustered Errors," NBER Technical Working Papers 0344, National Bureau of Economic Research, Inc.
  16. Mailath, George J & Postlewaite, Andrew, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 351-67, July.
  17. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
  18. Cox, James C & Smith, Vernon L & Walker, James M, 1988. " Theory and Individual Behavior of First-Price Auctions," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 61-99, March.
  19. Plott, Charles R. & Gray, Peter, 1990. "The multiple unit double auction," Journal of Economic Behavior & Organization, Elsevier, vol. 13(2), pages 245-258, March.
  20. Vernon L. Smith, 1965. "Experimental Auction Markets and the Walrasian Hypothesis," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 73, pages 387.
  21. Dekel, Eddie & Jackson, Matthew O. & Wolinsky, Asher, 2009. "Vote Buying: Legislatures and Lobbying," Quarterly Journal of Political Science, now publishers, vol. 4(2), pages 103-128, July.
  22. Klaus Kultti & Hannu Salonen, 2005. "Market for Votes," Homo Oeconomicus, Institute of SocioEconomics, vol. 23, pages 323-332.
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Cited by:
  1. Scott Duke Kominers & E. Glen Weyl, 2012. "Holdout in the Assembly of Complements: A Problem for Market Design," American Economic Review, American Economic Association, vol. 102(3), pages 360-65, May.
  2. Alessandra Casella & Thomas Palfrey & Sébastien Turban, 2012. "Vote Trading With and Without Party Leaders," NBER Working Papers 17847, National Bureau of Economic Research, Inc.
  3. Alessandra Casella & Sébastien Turban, 2012. "Democracy Undone. Systematic Minority Advantage in Competitive Vote Markets," NBER Working Papers 18573, National Bureau of Economic Research, Inc.
  4. Matias Iaryczower & Santiago Oliveros, 2013. "Power Brokers: Middlemen in Legislative Bargaining," Economics Discussion Papers, University of Essex, Department of Economics 731, University of Essex, Department of Economics.
  5. Drexl, Moritz & Kleiner, Andreas, 2013. "Preference Intensities in Repeated Collective Decision-Making," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79832, Verein für Socialpolitik / German Economic Association.

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